What an AOB does
An AOB is a contract that transfers your right to receive insurance payments to a third party — usually a roofing contractor or restoration company. After signing, the contractor:
- Communicates directly with your insurance carrier
- Negotiates the scope and dollars of the claim
- Receives the insurance check directly (not you)
- Has standing to sue the carrier if the claim is underpaid or denied
- Decides what work gets done within the scope they negotiated
Why contractors push AOBs
Contractors prefer AOBs because they remove uncertainty — they know exactly what they're getting paid because they negotiated it directly. They also gain leverage to fight underpayments without you needing to be involved. The downside, from your perspective, is that you've now lost most of your control over how the claim resolves.
When an AOB makes sense
AOBs can work for you in specific situations:
- Catastrophic damage where you can't manage the claim yourself (medical issues, age, time constraints)
- Out-of-state property where you can't be present for adjuster meetings
- You've researched the contractor extensively and trust their reputation
- The contractor has an established legal track record of fair AOB practices
- The AOB explicitly limits scope to a specific repair (not 'all benefits in perpetuity')
When an AOB is a trap
Walk away if any of these are true:
- Contractor is a 'storm chaser' (out-of-area, door-knocking after a storm)
- AOB has no scope limitation — they get rights to ALL claim benefits, not just for the work being done
- AOB doesn't terminate after the work is complete (some are 'in perpetuity')
- Contractor has limited or unverifiable local presence
- Contractor refuses to attach a written estimate to the AOB
- Carrier flags the AOB as suspicious during the call
- AOB allows the contractor to sue you if the carrier underpays them
State-specific AOB rules
Several states have passed AOB reform legislation due to fraud and abuse:
- Florida: 2022 reform sharply restricts AOBs in property claims — they're harder to use and easier to invalidate
- Texas: AOBs are legal but state law gives you 14 days to cancel after signing
- Most other states: minimal regulation, your protection is the contract language itself
- Always check the specific AOB for cancellation rights, scope limitations, and termination triggers
Better alternative: Direction to Pay
Many contractors will accept a 'Direction to Pay' instead of an AOB. This is a one-line letter to your carrier that says 'please make the check payable to me AND [contractor].' You retain all claim control; the contractor gets reasonable payment assurance. It's the right balance for most homeowners. If a contractor refuses a Direction to Pay and insists on an AOB, that's a meaningful signal about their motivations.